Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

oeo2oo, MLSOFT and other gold bulls,

"While your looking up those ounces in storage, perhaps you could do a little digging about the mechanics of the proposed Gold Council's ETF for gold. As I understand it, this would be a paper certificate that will trade freely, and thus available to any institution, including those not normally allowed to own physical gold. I am presuming that this set-up would be similar to QQQs where an institution can create QQQs by depositing the underlying securities and then selling the QQQs.

If these come to pass, it would seem to me that demand for physical would skyrocket, and thus the price of gold. Your thoughts?"


While I am having a difficult time gathering any 'carved in stone' details with which to substantiate your Golden QQQ's premise, it does appear that the instrument is, indeed, moving forward. (Bolded and underlined emphasis mine.)


Date : January 10, 2003

World Gold Council To Announce New Securitised Gold Instrument Next Month.

Interesting to note that the dollar took no notice of Bush's US$647 million fiscal stimulus package and fell to its lowest level against the euro for three years. It was no coincidence that gold once again challenged the US$354.50/oz level because gold is the only alternative investment that many people can see to a weak dollar. The possibility of a war in Iraq, problems with North Korea and hopes that Wall Street will recover in 2003 are mere sideshows. This is a fact that many find difficult to swallow.

The Times in London published an article yesterday in which it reported that net investment in gold had just about trebled from US$1.5 billion to US$4 billion in 2002 compared with 2001. These figures had been assembled by Gold Field Mineral Services, but presumably it was not GFMS which told the journalist that the figures represented a ‘profound disillusion with global stock markets and growing political tensions worldwide.' On the other hand it may have been, as Philip Klapwijk of GFMS was reported as agreeing with John Reade of UBS when he said, "My advice to holders of gold is to take some profits at these levels. People who have not yet got into the market should really stay away. They're too late." Klapwijk chimed in with, "There's US$20 to US$30 of froth in the price."

Not if you look at it from the aspect of the once almighty dollar, there ain't, mate. What one has to ask oneself is how long foreign investors are going to support the dollar. Already they are questioning the fact that last year the US ran a deficit of close to 5 per cent of GDP and had net external liabilities of 25 per cent. The actual figures at the end of 2001 were US external assets US$6,860 billion, valued at market prices, while external liabilities were US$9,170 billion. It does not require a genius to realize that this position cannot be sustained unless there is evidence that future income is going to more than match future expenditure. To paraphrase Mr Micawber, ‘ Annual income US$100, annual expenditure US$99.50, result happiness. Annual income US$100, annual expenditure US$100.50, result misery.

At present there is no sign that exports can grow at a rate sufficient to outpace imports and only a fall in the value of the dollar will switch demand from imports towards domestically produced goods and switch demand from the rest of the world to US exports. But the fall will have to be on a much bigger scale than has yet been seen as the US is such a large economy compared with the rest of the world and has only a small export sector in comparison with its own economy. It is a fascinating scenario which can only have one ending and already there is a move away from US assets by foreign investors as between 2000 and the fourth quarter of 2002 foreign private purchases of US assets fell from US$987 billion to US$$560 billion.

There is a long way to go, however, as the move away from the dollar is only in its infancy. So many traders and investors in the west have never experienced a major currency crash yet that they cannot grasp the full implications, and they have been stuffed with doubts about gold by their mentors. Only when they realize that the Islamic countries as well as China are organizing a strategic withdrawal from the US dollar and that this puts all paper currencies under pressure, will they come to appreciate how badly they have been misled. Fortunately for them the World Gold Council is expected to announce next month that it has obtained all the necessary regulatory approvals for a new securitised gold instrument. This will, hopefully, make investment in gold a lot simpler than buying physical bullion or derivatives and fund managers will be able to revert to the tried and tested way of managing portfolios with 5 to 10 per cent in gold without having to do a complete U- turn.

The problem faced by ordinary investors in this country as opposed to the rest of the world is that it is not easy to buy gold. Gold shares are another matter altogether, but gold itself is elusive. One way is to go on the internet, but many people have heard too much about credit card fraud and worry about good delivery so this is not the simplest of options. Another way is to take a roll of notes along to one of the shops such as Kenya Jewellers in Ealing Road , Wembley and buy a ten tola bar of 24 carat gold (99.99% pure)over the counter . The price is based on the underlying value plus a mark-up, so take along a calculator as they will not be offended. The alternative is to hop across to France where all banks sell physical gold. Hopefully the WGC initiative will make things simpler and it comes not a moment too soon.

* *
Oh, one last thing. At US$355/ounce of gold Mr Brown has lost this country 1.3 billion dollars which is very nearly £1 billion at the rate the dollar, into which he reinvested a large slice of the money , is going. Congratulations to our Chancellor of the Exchequer on such shrewd investment tactics.


http://www.minesite.com/archives/features_archive/2003/Jan-2003/goldcouncil100103.htm


Scandalous!!!! LOL!!

regards to all,
Dan